Boehner's "Plan B" failed to garner ample support from
Republicans, dragging the benchmarks into negative territory on
Friday. However, the benchmarks finished higher for the week.
Both personal spending and demand for durable goods showed an
upward trend in November. The financial and energy sectors were
the major losers among the S&P 500 industry groups.
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The Dow Jones Industrial Average (DJI) lost 0.5% to close the day
at 13,190.84. The Standard & Poor 500 (S&P 500) shed 0.9%
to finish Friday's trading session at 1,430.15. The tech-laden
Nasdaq Composite Index dropped 1.0% to end at 3,021.01. The
fear-gauge CBOE Volatility Index (VIX) climbed 1.0% to settle at
17.84. Consolidated volumes on the New York Stock Exchange,
American Stock Exchange and Nasdaq were roughly 8.59 billion
shares, significantly higher than the daily average of 6.47
billion shares. Declining stocks easily outpaced advancers on the
NYSE; as for 64% stocks that fell, only 34% stocks moved higher.
The movement of benchmarks is closely linked to developments
regarding ongoing negotiations on the Fiscal Cliff dilemma. A
negative development on this front, therefore, dragged benchmarks
into the red. Markets opened in the red on Friday and the
blue-chip index lost as much as 189 points before ending the
session lower by 120 points. However, benchmarks ended the week
on a winning note and the Dow gained 0.4%, S&P 500 surged
1.2% and the Nasdaq jumped 1.7%. The weekly jump came on the back
of optimism that Congress will seal a deal on the Fiscal Cliff
issue before January 1.
The important news for the day was that House of Representatives
Speaker John Boehner had failed to gather support from his own
party to pass "Plan B". Boehner's "Plan B" states that people
earning above $1 million will have to pay higher tax rates.
Boehner was disappointed after the failure of "Plan B" and said
if President Barack Obama and Congress fail to take necessary
steps to avoid the Fiscal Cliff, then it will take effect in a
few days. Boehner said: "How we get there, God only knows."
President Barack Obama said he is still hopeful that a deal will
be sealed before January 1 and will continue to work on a plan
which will reduce deficit in the long run. Obama said: "Even
though Democrats and Republicans are arguing about whether those
rates should go up for the wealthiest individuals, all of us -
every single one of us - agrees that tax rates shouldn't go up
for the other 98 percent of Americans."
Meanwhile, the Bureau of Economic Analysis revealed that personal
spending increased 0.4% in November, in line with consensus
estimates. In October personal spending had decreased 0.1%. The
report also states that personal income and disposable income
both surged 0.6% in November.
Separately, the U.S. Department of Commerce reported that orders
for manufactured durable goods gained 0.7% to touch $220.9
billion in November. This was above the consensus estimates of an
increase of 0.3% in November. Moreover, excluding transportation
and defense, new orders gained 1.6% and 0.8%, respectively. New
orders have now increased for six out of the last seven months.
The Financial Select Sector SPDR (XLF) lost 1.2% and was the
major loser among the S&P 500 industry groups. Stocks such as
JPMorgan Chase & Co. (NYSE:
), Wells Fargo & Company (NYSE:
), Goldman Sachs Group, Inc. (NYSE:
), PNC Financial Services (NYSE:
) and Citigroup Inc. (NYSE:
) slipped 1.2%, 1.7%, 1.0%, 1.5% and 1.7%, respectively.
The Energy Select Sector SPDR (XLE) also lost 1.2%. Stocks such
as Exxon Mobil Corporation (NYSE:
), Chevron Corporation (NYSE:
), Marathon Oil Corporation (NYSE:
), Petroleo Brasileiro Petrobras SA (NYSE:
) and Suncor Energy Inc. (NYSE:
) shed 1.9%, 0.6%, 1.3%, 3.0% and 0.7%, respectively.